4. The inability of the government to stabilize the economy in the 1970s when re

Question

4. The inability of the government to stabilize the economy in the 1970s when real GDP omic policy prescriptions. Which of the following is the main tenet of his has fallen, but inflation has remained high, led Robert Lucas to challiense eynesian argument? A) Act ive stabilization policies tend to be destabilizing because of the long policy lags and consequently, slow down the economy's self correction. There is no role for active stabilization policies B) because they do not take into ls the account rational choices by individuals; failure to do so generally cance impact of fiscal and monetary policies. Individuals respond in predictable ways to their changing economic active stabilization interferes with people's conditions. C) ability to respond to changing economic The economy is inherently stable and any role for stabilization policy should be limited to those that affect long-run aggregate supply to promote economic growth and not aggregate demand 5. Which of the following is true about the Great Depression? A) Following the Great Depression of 1929, the economy did not regain its potential B) Expansionary monetary and fiscal policies successfully moved the economy from C) The Great Depression of 1929 was considered to be a normal stage of business D) The Great Depression could be explained by classical economic theory output until the carly 1940s when the pressures of WWII sharply increased aggregate demand. the Great Depression of 1929 within three to five years. cycles 6, David Ricardo's work is associated with economics. A) Keynesian B) new Keynesian C) classical D) monetarist 7. The General Theory of Employment, Interest, and Money was written by A) Robert Lucas. B) David Ricardo. C) John Maynard Keynes. D) Thomas Malthus

Explanation / Answer

7) C. Keynes wrote General Theory of Employment, Interest and Money.

6) David ricardo is a classical economist

5)A. Great depression gave birth to a new economics i.e. Keynesiam economics

4)A.

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